Paypal is under investigation in Germany

February 1, 2023 by
Frank Calviño

Paypal is under investigation by the Federal Cartel Office (FCO) in Germany. The company has allegedly hindered market and price competition in its terms and conditions, the German watchdog says.

Paypal is currently one of the leading online payment methods in Germany: it is used by over 50 percent of German online shoppers. The German watchdog announced its investigation into the payment giant this week.

According to the German FCO (Bundeskartellamt), Paypal has possibly restricted market competitors in its user agreement. Merchants are currently not allowed to offer their goods and services at a lower price to customers who choose a cheaper payment method than PayPal.

In addition, retailers are barred from expressing a preference for other payment methods or making their use more convenient for customers.

Why is Paypal under investigation?

The Bundeskartellamt claims these terms may make it “more difficult” for other payment methods to “compete successfully” with PayPal or to enter the market in the first place.

Bundeskartellamt president Andreas Mundt says: “These clauses might restrict competition and violate the prohibition of abuse of a dominant position.

“We will now assess the extent of PayPal’s market power and how far online sellers depend on offering PayPal as a payment method.”

The Bundeskartellamt cites market studies that show PayPal is both the leading online payment method in Germany and one of the most expensive.

The regulator says the antitrust proceeding is based on legislation that prohibits the abuse of a dominant position as well as potential anti-competitive agreement violations.

PayPal is not the only one

In a separate antitrust action in Europe last year — also concerning digital payments — the Dutch Authority for Consumers and Markets forced iOS maker Apple to allow dating apps operating in the market to use non-Apple-based payment technology to process in-app sales.

Apple initially sought to challenge the order, but after a string of penalty payments and several months of back and forth, it came up with a proposal that was accepted by the watchdog last summer.

In recent years, the European Union has also been eyeing online payment tech — taking action last year over restrictions Apple applies to Apple Pay.

Such interventions prefigure bigger and potentially more impactful changes for tech giants in the European Union this year as a significant competition reform, called the Digital Markets Act, comes into application across the bloc. This “ex-ante” regime will flip the classical antitrust protocol — whereby market power must be assessed, and investigation precedes remedy — by applying, upfront, a set of fixed rules on platforms designated as competitively significant “gatekeepers.” 

To become more responsive and proactively level the playing field between giants and the smaller competitors that rely on them to reach consumers.

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